Joseph E. Stiglitz
New York, W. W. Norton & Company, 2013
CHF: 15,22/ EUR:14.25/ USD: 14.62
Born in Gary, Indiana in 1943, Joseph E. Stiglitz is an American economist and professor at Columbia University. He was awarded the 2001 Nobel Prize in Economic Sciences for his analyses of markets with asymmetric information. His work focuses on income distribution, risk, corporate governance, public policy, macroeconomics and globalization. He is author of several books, one of them being The Price of Inequality (1).
This book’s central thesis is that inequality is not inevitable, and we are paying a huge price for its existence. Not only the economy but also the society as a whole suffers its effects.
In each chapter of the book, several misconceptions are evaluated and deconstructed; possible solutions are presented for each of them.
One of the main ideas present in this book is that inequality varies between different countries. The Gini coefficient is a standard measure of inequality that can be useful to compare countries. If income were equally distributed to all, the Gini coefficient would be 0, which means absolute equality. On the contrary, if all the income were delivered to a single person, the Gini coefficient would be 1, which means maximum inequality. According to this measure, countries such as Sweden, Norway and Germany, with a coefficient around 0.3, may be considered more equal societies, when compared to the United States of America (US), which has a coefficient of approximately 0.4. Furthermore, and according to data from the World Bank, the US’ Gini index has increased from 0.403 in 2010 to 0.414 in 2016 (2). Conversely, Portugal’s Gini index decreased from 0.358 in 2010 to 0.338 in 2016 (2)
Another of the myths that is deconstructed is that someone’s income is proportional to
the value delivered to society. As the author explains, the richest individuals in American society are not scientists, for example, but people that know how the economy works and that take advantage from the loopholes in the system, such as CEOs of big companies or people who work in the financial sector, for example.
Another idea explained is that the trickle-down economics, by reducing taxation at the top is, in the long run, bad for the economy, creating a snowball effect that can end up with an economic recession. In addition, the fact that the world is a global market means that anyone in any country is “competing” with other professionals in other countries. Those professionals can be hired for jobs at a lower cost than professionals from the same country. This devaluates the job and, consequently, reduces those professionals’ wages. Therefore, it seems that “The rich are getting richer and the poor are getting poorer”.
Why does inequality tend to persist? The 1% top of society’s influence on policymakers and on the public perception about their activities may play an important role. Good legislation may have the power to prevent the generation of monopolies. The creation of monopolies hinders competitiveness, making the market not working as it should. Therefore, it is important to create laws which promote competitiveness in the market, political reforms, financial regulation, social legislation and better education, reducing inequality.
Autoria Nuno Do Amparo
Edição Filipa Gomes
1. Columbia University 2020, accessed 17 June 2020, https://www8.gsb.columbia.edu/faculty/jstiglitz/bio
2. The World Bank 2020, accessed 28 June 2020, https://data.worldbank.org/indicator/SI.POV.GINI?end=2016&locations=US&start=2016&view=bar